Services: SALES TAX EXEMPTION
Sales tax exemption is an easy way to save precious dollars – especially in the first years. Many nonprofit organizations qualify for sales tax exemption. This means you can purchase certain items without paying sales tax. Qualifying nonprofits must have their “sales tax-exempt status” authorized by the State Department of Revenue. State sales tax exemption isn’t automatically granted with IRS tax exemption.
Note: This exemption applies only to purchases made by nonprofits in furtherance of their mission. Administrative expenses are not exempt. Additionally, if your organization sells products subject to sales tax collection, you must still collect and remit sales tax. If you’re not sure whether your organization is doing that right, call for a free consultation.
In Minnesota, nonprofits generally qualify for sales tax exemption if the organization is:
- Organized and operated exclusively for charitable, religious or educational purposes and has obtained exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code; or
- A senior citizen group that is organized for pleasure, recreation or other nonprofit purpose, not including housing. The group must be an exempt organization under 501(c) of the Internal Revenue Code and must limit membership to those who are age 55 years or older or are physically disabled; or
- A cemetery that is owned by a religious organization.
Examples of nonprofit organizations that may qualify for sales tax exempt status include churches, private schools, colleges and universities, museums and historical societies, youth organizations, senior citizen groups, and volunteer fire departments.
Examples of organizations that do not qualify for sales tax exempt status include Chambers of Commerce, Knights of Columbus, Masonic Lodges, city-run celebrations, homeowners’ associations, fraternities, sororities, lake improvement associations, medical clinics, Jaycees, Kiwanis and Lions Clubs, adult sports clubs of any type, trade associations, prayer societies, professional associations, senior housing organizations, animal rescues, and social clubs.
Learn more from the State Department of Revenue. Application for sales tax exemption is included with a nonprofit formation package. Often, established organizations find that they never applied for sales tax exemption. If that’s you, call today – we can help!